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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____ TO _____
Commission File No. 0-14147
QUESTAR PIPELINE COMPANY
(Exact name of registrant as specified in its charter)
State of Utah 87-0307414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 East 100 South, P.O. Box 45360, Salt Lake City, Utah 84145-0360
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (801) 324-5555
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933:
9 7/8% Debentures due 2020
9 3/8% Debentures due 2021
Medium Term Notes, Series A, 5.85% to 7.55% due 2008 to 2019
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of March 1, 2001. $0.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 1, 2001.
6,550,843 shares of Common Stock, $1.00 par value. (All shares are
owned by Questar Regulated Services Company.)
Registrant meets the conditions set forth in General
Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing
this Form 10-K Report with the reduced disclosure format.
TABLE OF CONTENTS
Heading Page
PART I
Items 1.
and 2. BUSINESS AND PROPERTIES. . . . . . . . . . . . . . . . . . 1
General. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Transmission System. . . . . . . . . . . . . . . . . . . . 2
Transportation Service . . . . . . . . . . . . . . . . . . . 4
Storage/Processing . . . . . . . . . . . . . . . . . . . . 4
New Projects . . . . . . . . . . . . . . . . . . . . . . . 5
Regulatory Environment . . . . . . . . . . . . . . . . . . . 6
Competition. . . . . . . . . . . . . . . . . . . . . . . . . 7
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Relationships with Affiliates. . . . . . . . . . . . . . . 7
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 9
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . 9
Item 6. (Omitted). . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION. . . . . . . . . 10
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . 14
PART III
Items
10-13. (Omitted). . . . . . . . . . . . . . . . . . . . . . . . . 14
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
FORM 10-K
ANNUAL REPORT, 2000
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
General
Questar Pipeline Company ("Questar Pipeline" or the "Company")
is an interstate pipeline company that transports natural gas in the
Rocky Mountain states of Utah, Wyoming, and Colorado, and provides
storage services in Utah and Wyoming. The Company is an affiliate
of Questar Corporation ("Questar"), a diversified energy services
holding company. As a "natural gas company," the Company is subject
to regulation by the Federal Energy Regulatory Commission (the
"FERC") pursuant to the Natural Gas Act of 1938, as amended.
Questar Pipeline, as an open-access pipeline, transports gas
for affiliated and unaffiliated customers. It also owns and
operates the Clay Basin storage facility, which is a large
underground storage project in northeastern Utah, and other
underground storage operations in Utah and Wyoming. The Company,
through a subsidiary, also owns and operates a processing plant.
Questar Pipeline is involved in two partnerships, Overthrust
Pipeline Company ("Overthrust"), and TransColorado Gas Transmission
Company ("TransColorado").
Questar Pipeline is a wholly-owned subsidiary of Questar
Regulated Services Company ("Regulated Services"), which is a
subholding company under Questar. Other entities within the
Regulated Services group include Questar Gas Company ("Questar
Gas"), a local distribution company, and Questar Energy Services,
Inc. ("QES"), an entity created to market additional energy-related
services. All Regulated Services companies are managed by a common
group of officers, which increases administrative efficiency.
The Company has significant business relationships with its
affiliates, particularly Questar Gas. Questar Gas has reserved
approximately 798,000 decatherms ("Dth") per day of firm
transportation capacity on Questar Pipeline's transmission system to
serve the needs of its 704,629 customers in Utah, southwestern
Wyoming, and southeastern Idaho, (A Dth is the amount of heat
energy equal to 10 therms or one million British thermal units
("Btu")). Questar Gas also contracts for additional capacity during
the heating season and had 828,000 Dth per day during the period
from December 1, 2000 to February 28, 2001. Questar Gas has also
contracted for firm storage capacity available at Clay Basin and has
storage contracts at the smaller peaking storage reservoirs.
Through a subsidiary, Questar Pipeline has a processing plant that
extracts carbon dioxide from gas volumes delivered to Questar Gas.
Questar Pipeline transports natural gas owned by Questar Gas
and produced from properties operated by Wexpro Company ("Wexpro"),
another affiliate, as well as natural gas volumes purchased directly
by Questar Gas from field producers and other suppliers. The
Company also transports volumes that are marketed by Questar Energy
Trading Company ("Questar Energy Trading"), another affiliated
entity. The following diagram sets forth the corporate structure of
the Company and certain affiliates:
Questar Corporation
Questar Market Resources, Inc.
Wexpro Company
Questar Exploration and Production Company
Questar Energy Trading Company
Questar Gas Management Company
Questar Regulated Services Company
Questar Gas Company
QUESTAR PIPELINE COMPANY
Questar Line 90 Company
QuestarTransportation Services Company
Questar Southern Trails Pipeline Company
Questar TransColorado, Inc.
Questar Energy Services, Inc.
Questar InfoComm, Inc.
The major activities of Questar Pipeline are described in more
detail below:
Transmission System
The Company's core transmission system is strategically located in the
Rocky Mountains near large reserves of natural gas. It is referred to as a
"hub and spoke" system, rather than a "long-line" pipeline, because of its
physical configuration, multiple interconnections to other interstate
pipeline systems, and access to major producing areas. Questar Pipeline's
transmission system has connections with the pipeline systems of Colorado
Interstate Gas Company ("CIG"); the middle segment of the Trailblazer
Pipeline System ("Trailblazer") owned by Wyoming Interstate Company, Ltd.
("WIC"); The Williams Companies Inc. ("Williams"), including Kern River Gas
Transmission Company ("Kern River"); TransColorado; and Overthrust. These
connections have opened markets outside Questar Gas's service area for the
Company and allow it to transport gas for others.
The Company's transmission system includes 1,734 miles of transmission
lines that link various producers of natural gas with Questar Gas's
distribution facilities in Utah and Wyoming and interconnect with other
pipelines. (This total transmission mileage includes pipelines associated
with the Company's storage fields and tap lines. It does not include the
systems in which the Company has a partnership interest or Southern Trails
line.) The system includes two major segments, often referred to as the
northern and southern systems, which are linked together. The northern
segment extends from northwestern Colorado through southwestern Wyoming into
northern Utah; the southern segment of the transmission system extends from
western Colorado to Payson, in central Utah. The link between the two
systems is provided by Questar Pipelines line that runs from its
Kanda/Coleman compressor station on the northern segment to its Clay Basin
storage reservoir and then on to its Fidlar compressor station on the
southern system.
The Company's pipelines, compressor stations, regulator stations, and
other transmission-related facilities are constructed on properties held
under long-term easements, rights of way, or fee interests sufficient for
the conduct of its business activities.
In addition to the transmission system described above, Questar
Pipeline has a 72 percent interest in and is the operating partner of
Overthrust, a general partnership that was organized in 1979 to construct,
own, and operate the Overthrust segment of Trailblazer. Trailblazer is a
major 800-mile pipeline system that transports gas from producing areas in
the Rocky Mountains to the Midwest. The 88-mile Overthrust segment is the
western-most segment in Trailblazer's system. Although the Overthrust
segment is currently underutilized, the Company and its remaining partners
are reviewing opportunities, including backhauling, to increase its value.
The Overthrust partnership agreement requires unanimous consent of all
partners on major operating and financial issues.
Questar TransColorado, Inc., which is a subsidiary of Questar Pipeline,
and KN TransColorado, Inc., a subsidiary of Kinder Morgan, Inc. (formerly KN
Energy) each have a 50 percent interest in the TransColorado pipeline
project. The Company's ownership interest in the project is subject to a
complex lawsuit that is described under "Legal Proceedings" later in this
Report.
The pipeline, which was completed March 31, 1999, was built to
transport gas from the Rocky Mountain area that was traditionally priced
lower than other gas supplies to California and Midwestern markets through
interconnections with major pipeline systems. The pipeline originates at a
point on Questar Pipeline's system 25 miles east of Rangely in northwestern
Colorado and extends 292 miles to the Blanco hub in northwestern New Mexico.
In its first two full years of operations, TransColorado incurred
significant losses because basis differentials, which reflect gas prices in
different producing basins, were not sufficient to encourage producers and
market aggregators to transport volumes on the line. The Company wrote down
its investment in TransColorado at year-end 1999, but will resume recording
its share of the project's financial results as of April 1, 2001, pending
the outcome of the litigation and its ability to sell its interest to its
partner.
Questar Pipeline owns and operates a major compressor complex near Rock
Springs, Wyoming, that compresses volumes of gas from the Company's
transmission system for delivery to the WIC segment of the Trailblazer
system and to CIG. The complex has become a major delivery point on Questar
Pipeline's system. Five of the Company's major natural gas lines are
connected to the system at the complex. In addition, both of CIG's Wyoming
pipelines and the WIC segment are connected to the complex.
Transportation Service
Questar Pipeline's largest single transportation customer is its
affiliate, Questar Gas. During 2000, the Company transported 108.2 million
decatherms ("MMDth") for Questar Gas, compared to 105.5 MMDth in 1999.
These transportation volumes include Questar Gas's cost-of-service gas
produced by Wexpro and volumes purchased by Questar Gas directly from field
producers and other suppliers.
Questar Gas has about 77 percent of Questar Pipeline's reserved daily
capacity. The Company's transportation agreement with Questar Gas was
extended in 1999 for three years and expires June 30, 2002. Questar Gas
paid an annual reservation charge of approximately $54.3 million to the
Company in 2000, which includes reservation charges attributable to firm and
"no-notice" transportation. Questar Gas only needs its total reserved
capacity during peak-demand situations. When it is not fully utilizing its
capacity, Questar Gas releases the capacity to others, primarily industrial
transportation customers and marketing entities.
The Company recovers approximately 95 percent of its transmission cost
of service through reservation charges from firm transportation customers.
In other words, these customers pay primarily for access to transportation
capacity. Consequently, the Company's throughput volumes do not have a
significant effect on its short-term operating results. Questar Pipeline's
transportation revenues are not significantly affected by fluctuating demand
based on the vagaries of weather or gas prices. The Company's revenues may
be adversely affected if the FERC changes its basic regulatory scheme of
"straight fixed-variable" rates.
The Company's total system throughput increased from 253.5 MMDth in
1999 to 275.2 MMDth in 2000. Questar Pipeline increased the volumes it
transports for nonaffiliated customers from 135.9 MMDth in 1999 to 158.6
MMDth in 2000.
Questar Pipeline's transmission system is an open-access system and has
been since September of 1988. The Company's tariff provisions require it to
transport gas on a nondiscriminatory basis when it has available
transportation capacity. The Company does have opportunities for
interruptible transportation services.
Storage/Processing
Questar Pipeline's Clay Basin storage facility in northeastern Utah is
the largest underground storage reservoir in the Rocky Mountains. The
facility has a total capacity of 117.5 Bcf. Clay Basin has been operational
since 1977 and has been successfully expanded several times.
Clay Basin's firm storage capacity is fully subscribed by customers
under long-term agreements. Questar Gas currently has 13.3 MMDth of working
gas capacity at Clay Basin. Other large customers include Williams; Puget
Sound Energy Company, a distribution utility in the state of Washington; and
Duke Energy Trading and Marketing L.L.C. Storage service is important to
distribution companies that need to match annual gas purchases with
fluctuating customer demand, improve service reliability, and avoid
imbalance penalties. Questar Pipeline offers interruptible storage service
at Clay Basin and also allows firm storage service customers the right to
release their injection and withdrawal rights to other parties.
The Company also owns and operates three smaller storage reservoirs.
These projects were developed specifically to serve Questar Gas's needs, and
Questar Gas reserves 100 percent of their working gas capacity. These small
reservoirs are used primarily to supplement Questar Gas's gas supply needs
on peak-demand days.
The Company's storage facilities are certificated by the FERC, and its
rates for storage service (based on operating costs and investment in plant
plus an allowed rate of return) are subject to approval by the FERC.
Through its subsidiary--Questar Transportation Services
Company--Questar Pipeline also owns a processing plant near Price, Utah,
that removes carbon dioxide from coalbed methane gas in order to raise the
Btu content enough to be safely and efficiently used in appliances in
Questar Gas's service area. The plant began operating in June of 1999.
New Projects
Questar Pipeline expects to construct its Mainline 104 project during
2001 and meet its original timetable to have the project in service before
the winter heating season of 2001-2002. The Bureau of Land Management has
established a schedule of town meetings to consider public response the new
line. The Company, however, does not yet have the final environmental
approvals to construct the line, but the timetable established by the
federal agencies involved with the environmental review, if met, would allow
the Company to meet its schedule. This line, which is 75.6 miles long and
24 inches in diameter, extends from Price, Utah, near the Ferron area of
coalbed methane gas, to Questar Gas's system at Payson, Utah, and the Kern
River line near Elberta, Utah. The project is estimated to cost $80 million
and will provide approximately 272,000 Dth per day of additional firm
transportation capacity. CIG has a 31.3 percent interest in Mainline 104
and has subscribed to 94,000 Dth of capacity. Questar Gas has contracted
for 50,000 Dth of capacity on the new line all year long and 50,000 Dth of
additional capacity during the heating-season months of December, January
and February. This additional capacity will allow Questar Gas to have
additional firm capacity to meet its long-term needs.
Questar Pipeline, through a subsidiary, is still continuing to
negotiate necessary rights of way and obtain market support for the Southern
Trails project. It has received regulatory approval from the FERC and
formal certification from the California State Lands Commission. This
project involves converting a 700-mile oil pipeline and installing the
necessary compression facilities to transport natural gas volumes. The line
extends from the Four Corners area where the states of Utah, Colorado, New
Mexico, and Arizona meet to Long Beach, California.
Current operating plans divide the line into two segments. The
eastern segment, with a daily capacity of 80,000 Dth, extends from the San
Juan Basin to the California state line and is expected to be in service in
2002. The western segment, which has a daily capacity of 120,000 Dth and
extends from the California state line to Long Beach, needs additional
market support and action by the California Public Utilities Commission to
support competition for transportation volumes.
The Company will continue to review opportunities to build additional
storage capacity that will compliment its integrated hub and spoke system
and its baseload storage capacity in Clay Basin.
Regulatory Environment
The Company is a natural gas company under the Natural Gas Act and is
subject to the jurisdiction of the FERC as to rates and charges for storage
and transportation of gas in interstate commerce, construction of new
storage and transmission facilities, extensions or abandonments of service
and facilities, accounts and records, and depreciation and amortization
policies. Questar Pipeline holds certificates of public convenience and
necessity granted by the FERC for the transportation and underground storage
of natural gas in interstate commerce and for the facilities required to
perform such operations.
Questar Pipeline does not currently plan to file a general rate case in
2001. It, however, will continue to review its revenues and costs as it
adds new facilities that are not included in its rate base and makes
expenditures to comply with regulatory mandates.
Questar Pipeline is currently involved in technical conferences with its
customers to deal with the impact of the FERC's Order No. 637, which was
issued as a final rule on February 9, 2000. This order revised regulations
that were designed to enhance the competitiveness and efficiency of the
interstate pipeline grid. It revised pricing policies by waiving price
ceilings for short-term released capacity for a two-year period and
permitted pipelines to file for peak/off-peak and term differentiated rate
structures. The order effected changes in regulations relating to
scheduling procedures, capacity segmentation, pipeline imbalance procedures
and penalties, pipeline reporting requirements, and right of first refusal.
The Company's somewhat unique configuration as a hub and spoke pipeline,
rather than as a long line, makes it difficult for Questar Pipeline to offer
traditional capacity segmentation without reducing shippers' flexibility to
use their capacity on its system and without negatively affecting its own
throughput capacity. The Company, however, is optimistic that it will reach
a settlement with its shippers and the FERC staff that will allow it to
comply with the requirements of Order No. 637 without negatively affecting
shippers or its throughput.
Under the Natural Gas Pipeline Safety Act of 1968, as amended, the
Company is subject to the jurisdiction of the Department of Transportation
("DOT") with respect to safety requirements in the design, construction,
operation and maintenance of its transmission and storage facilities. The
Company also complies with the DOT's drug and alcohol testing regulations.
In addition to the regulations discussed above, Questar Pipeline's
activities in connection with the operation and construction of pipelines
and other facilities for transporting or storing natural gas are subject to
extensive environmental regulation by state and federal authorities,
including state air quality control boards, the Bureau of Land Management,
the Forest Service, the Corps of Engineers, and the Environmental Protection
Agency. These compliance activities increase the cost of planning,
designing, installing and operating facilities.
Competition
Questar Pipeline extended its footprint to other parts of the western
United States by participating in the TransColorado pipeline project and
purchasing the Southern Trails line. There are market risks associated with
these projects, as evidenced by Questar Pipeline's decision to write down
its investment in TransColorado. Questar Pipeline's efforts to complete the
Southern Trails conversion are affected by its ability to obtain market
support.
Competition for Questar Pipeline's transportation and storage services
has intensified in recent years. Regulatory changes have significantly
increased customer flexibility. The Company actively competes with other
interstate pipelines for transportation volumes throughout the Rocky
Mountain region.
The Company has two key assets that contribute to its continued success.
It has a strategically located and integrated, low-cost transmission system
with interconnections to major pipeline systems and with access to major
producing areas and markets. Questar Pipeline also has the Clay Basin
storage facility, a storage reservoir that has been successfully operated
since 1977, which has been expanded in response to interest from customers
and is fully subscribed by firm-service customers under contracts that are
generally long-term in nature. Questar Pipeline intends to take advantage
of these assets by increasing its "intra hub" capacity or its ability to
quickly and reliably move gas volumes between receipt and delivery points
and by continuing to review opportunities to increase its storage capacity
and services.
Employees
As of December 31, 2000, the Company and a wholly-owned subsidiary had
an aggregated 108 employees, compared to the 129 employees as of year-end
1999. Regulated Services, the Company's parent, had 358 employees (compared
to 431 at year-end 1999) who perform specified services for Questar
Pipeline, and other members of the group. The reduction in employees
reflects an early retirement program offered to employees of the Regulated
Services group effective October 31, 2000. None of these employees is
represented under collective bargaining agreements. The Company
participates in the comprehensive benefit plans of Questar and pays the
share of costs attributable to its employees covered by such plans. Questar
Pipeline's employee relations are generally deemed to be satisfactory.
Relationships with Affiliates
There are significant business relationships between the Company and its
affiliates, particularly Questar Gas. Some of these relationships are
described above. See Note 8 of the Consolidated Financial Statements
included under Item 14 of this Report for additional information concerning
transactions between the Company and its affiliates.
The Company obtains data processing and communication services from an
affiliate, Questar InfoComm Inc. Regulated Services, the Company's parent,
has employees who perform administrative, engineering, accounting,
marketing, budget, tax, and legal services for all entities within it,
including Questar Pipeline. Questar also provides certain administrative
services--governmental affairs, financial, and audit--to the Company and
other members of the consolidated group. A proportionate share of the costs
associated with such services is directly billed or allocated to Questar
Pipeline.
ITEM 3. LEGAL PROCEEDINGS.
TRANSCOLORADO. Questar TransColorado, Inc. ("QTC"), a subsidiary of
Questar Pipeline, owns a 50 percent interest in the TransColorado Gas
Transmission Company ("TransColorado), which is the partnership that built
and operates the TransColorado pipeline project. QTC and its partner, KN
TransColorado, Inc. ("KNTC") are involved in a complex lawsuit that is
pending in a state district court in Colorado. At center stage in the
lawsuit is the validity of a contractual right claimed by QTC to sell its 50
percent interest in TransColorado to KNTC during the 12-month period
beginning March 31, 2001.
KNTC originally filed the lawsuit in June of 2000 alleging that
Questar Pipeline and its affiliates breached their fiduciary duties to
TransColorado and KNTC by developing a plan to construct and operate a new
pipeline (this project--Mainline 104--is described under the section "New
Projects") that would compete with TransColorado, rendering it economically
unviable. KNTC is seeking $150 million plus punitive damages, a declaratory
judgment that KNTC's obligation to purchase QTC's interest in the project be
declared void and unenforceable, and a dissolution of the partnership under
Colorado law.
QTC and its affiliates subsequently filed a counterclaim and third
party complaint against KNTC and its named affiliates, including Kinder
Morgan, Inc., seeking a declaratory judgment that its contractual right to
sell its interest to Kinder Morgan is binding and enforceable and damages of
at least $185 million.
The parties have entered into a standstill agreement that preserves
the claims made by both parties pending the resolution of the litigation.
On December 31, 2000, QTC gave notice of its election to exercise its
contractual right to sell its 50 percent interest in TransColorado to KNTC,
subject to the standstill agreement. The Company will account for its share
of the projects financial results as of April 1, 2001. The parties are
evaluating the retention of an outside party to operate the TransColorado
pipeline during the litigation, which is currently scheduled for trial in
February of 2002.
GRYNBERG. Questar affiliates, including the Company, are named
defendants in a lawsuit filed by an independent producer (Grynberg) under
the Federal False Claims Act. This case and the 75 substantially similar
cases filed by Grynberg against pipelines and their affiliates have been
consolidated for discovery and pre-trial motions in Wyoming's federal
district court. The cases involve allegations of industry-wide
mismeasurement and undervaluation of gas volumes on which royalty payments
are due the federal government. The complaint seeks treble damages and
imposition of civil penalties. The federal district judge has not ruled on
the defendants' motion to dismiss.
On March 8, 2001, the trial court judge granted a motion to dismiss
another lawsuit filed by Grynberg against several Questar defendants
including Questar Pipeline. This case, which was filed in a Utah state
district court, claims that the Questar defendants mismeasured gas volumes
attributable to Mr. Grynberg's working interest in a specified property in
southwestern Wyoming. The plaintiff's allegations included breach of
contract, negligent misrepresentation, fraud, breach of fiduciary duty, etc.
The judge dismissed the lawsuit based on defendants' arguments that the
applicable statute of limitation had expired and there was no basis to
support fraudulent concealment claims or independent tort claims.
QUINQUE. Questar Pipeline, Questar Gas and several other Questar
affiliates are among the 220 named defendants in Quinque Operating Company
v. Gas Pipelines, which was recently transferred from the Wyoming federal
district court where it had been consolidated with the Grynberg cases to the
Kansas state court where it had been originally filed. This case is very
similar to the cases filed by Mr. Grynberg against the pipeline industry,
but the allegations of systematic mismeasurement of natural gas volumes and
resulting underpayment of royalties are made on behalf of private and state
lessors, rather than on behalf of the federal government.
It is too early to estimate the outcome of the various cases filed
against Questar Pipeline and its affiliates. Management believes that the
outcome of these cases will not have a material adverse effect on the
Company's financial position or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of its stockholder
during the last quarter of 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's outstanding shares of common stock, $1.00 par value, are
currently owned by Regulated Services. Information concerning the dividends
paid on such stock and the Company's ability to pay dividends is reported in
the Statements of Shareholder's Equity and Notes to Financial Statements
included in Item 8.
ITEM 6. SELECTED FINANCIAL DATA.
The Company, as the wholly owned subsidiary of a reporting person, is
entitled to omit the information requested in this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Questar Pipeline conducts natural gas transmission, storage and
processing operations. Following is a summary of financial
results and operating information:
Year Ended December 31,
2000 1999 1998
(In Thousands)
OPERATING INCOME
Revenues
Transportation $ 72,547 $ 69,885 $ 70,824
Storage 37,711 37,647 36,463
Processing 6,763 3,570
Other 2,055 1,058 1,270
Total revenues 119,076 112,160 108,557
Operating expenses
Operating and maintenance 43,761 38,534 38,832
Depreciation and amortization 15,391 16,743 13,927
Other taxes 3,071 2,488 2,600
Total operating expenses 62,223 57,765 55,359
Operating income $ 56,853 $ 54,395 $ 53,198
OPERATING STATISTICS
Natural gas transportation
volumes (in Mdth)
For unaffiliated customers 158,604 135,886 120,747
For Questar Gas 108,183 105,499 107,501
For other affiliated customers 8,370 12,153 26,878
Total transportation 275,157 253,538 255,126
Transportation revenue (per dth) $ 0.26 $ 0.28 $ 0.28
Clay Basin storage, working gas-
capacity (in Bcf) 51.3 51.3 51.3
Revenues
Revenues rose 6% in 2000 compared with 1999 due to an increase in the
demand charges resulting from a higher quantity of transportation
volumes under firm contracts and a full year of operation of a plant
that removes excess carbon dioxide from the gas stream. The plant
began operation mid-year 1999.
The transportation system experienced an increased demand for gas
transportation resulting from colder fourth-quarter temperatures and
expanded usage for regional power generation. As of December 31, 2000,
approximately 77% of Questar Pipeline's transportation system was
reserved by firm-transportation customers under contracts with varying
terms and lengths. Questar Gas has reserved transportation capacity
from Questar Pipeline of approximately 828,000 dth per day,
representing 69% of the total reserved daily-transportation capacity
at December 31, 2000. This contract, which accounts for 78% of the
demand charges collected by Questar Pipeline, extends through June
2002.
Revenues from storage operations were unchanged in 2000 when compared
with 1999 after increasing 3% in 1999. Questar Pipeline's primary
storage facility at Clay Basin in eastern Utah was enlarged in May
1998. The storage facility is 100% subscribed under long-term
contracts. Most of those contractual volumes have remaining terms of
at least nine years. Questar Gas has contracted for 26% of
firm-storage capacity for at least seven years.
Operating expenses
Operating and maintenance expense climbed 14% in 2000 compared with
1999. A full year of expenses associated with a gas-processing
plant added $2 million of expense and legal costs in a case
involving the TransColorado pipeline added $1.8 million. The
estimated useful life of the carbon-dioxide removal plant was
increased from 10 to 20 years resulting in a $1.3 million reduction
of depreciation expense in 2000. Because processing fees are
determined on a cost-of-service basis, the lower depreciation
expense resulted in a $1.3 million refund to Questar Gas, the
primary customer of processing services. Depreciation expense
increased 20% in 1999 resulting from capital investment in
facilities and information-technology systems.
Questar Regulated Services initiated an early retirement window
program effective October 31, 2000. A total of 262 employees from
Questar Gas, Questar Pipeline and Questar Regulated Services elected
to retire. The window program is projected to result in pretax
labor-cost savings for Regulated Services of $6-8 million yearly.
Questar Pipeline receives about one-third of the effect of the early
retirement window.
Debt expense
Interest expense increased due to higher interest rates in 2000.
The Company received equity investment from its parent company in
2000 and used the proceeds to repay debt owed to Questar. Interest
expense increased in 1999 compared with 1998 as a result of
increased borrowing in 1999.
Income taxes
The effective combined federal and state was 31.5% in 2000, 38.5% in
1999 and 34.9% in 1998. The income tax rate in 2000 was below the
combined statutory rate of about 37% primarily due to a Colorado
state income tax credit derived from conducting business in a
designated enterprise zone reduced state income taxes by $3.2
million in 2000.
TransColorado case
Questar TransColorado Inc. (QTC), a subsidiary of Questar Pipeline,
and KN TransColorado, Inc., (KNTC), a subsidiary of Kinder Morgan,
are partners in the TransColorado Gas Transmission Company
(TransColorado). The partners are involved in a complex lawsuit
that is pending in a state district court in Colorado. At the center
of the lawsuit is the validity of a contractual right claimed by QTC
to put its 50% interest in TransColorado to KNTC during the 12-month
period beginning March 31, 2001. QTC and KNTC entered a standstill
agreement regarding various issues in the litigation. QTC provided
notice to KNTC that it elected to put its interest in TransColorado
as of March 31, 2001, were it not for the provisions of the
standstill agreement.
Questar Pipeline recorded a $49.7 million pretax write-down of its
investment in the TransColorado partnership in 1999. QTC share of
TransColorado's operating losses ranged from $.3 million to $1.2
million per month.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Year Ended December 31,
2000 1999 1998
(In Thousands)
Net income (loss) $29,825 ($8,391) $27,891
Adjustments to net income 31,026 61,629 14,454
Changes in operating assets and liabilities 6,545 (37,895) 18,638
Net cash provided from operating activities $67,396 $15,343 $60,983
Net cash provided from operating activities increased 339% in 2000
compared with 1999 due primarily to timing differences in accounts
payable and accounts receivable. Payment of accounts payable
balances in 1999, that had increased because of year end 1998
construction projects, consumed a large amount of cash. Collections
of accounts receivable in 2000, primarily from a partner in a
pipeline project, resulted in positive cash flow for the Company.
Investing Activities
Capital spending focused on expansion of the gas transmission
network, conversion of a crude-oil pipeline to transport gas into
Southern California and the acquisition of an additional 18%
interest in a pipeline partnership. Following is a summary of
capital expenditures for 2000 and 1999 and a forecast of 2001
capital spending:
Year Ended December 31,
2001
Forecast 2000 1999
(In Thousands)
Transmission system $20,700 $15,312 $11,936
Storage 11,900 333 1,571
Partnerships 7,900 9,024 14,414
Southern Trails Pipeline 13,975 14,639
Processing plant 250 2,912
General 6,600 4,141 4,952
$47,100 $43,035 $50,424
Capital spending in 2001 is expected to range between $47.1 million
and $166.1 million. The upper spending level is contingent upon two
key projects going forward. A 75-mile pipeline planned for central
Utah is awaiting final environmental approval. If approval is
received in 2001 and the pipeline is constructed, Questar Pipeline
could spend an additional $74 million. Another major pipeline
project, Questar Southern Trails Pipeline, could begin construction
in 2001 pending final right of way agreements. This would further
increase capital spending by $45 million.
Financing Activities
Net cash provided from operating activities plus a $60 million
equity investment from its parent company enabled Questar Pipeline
to fund 2000 capital expenditure, repay debt and pay dividends.
Forecasted 2001 capital expenditures are expected to be financed
from net cash flow provided from operations and borrowing on a
medium-term note program and from Questar.
Questar makes loans to Questar Pipeline under a short-term borrowing
arrangement. Outstanding short-term notes payable to Questar
totaled $42.5 million with an interest rate of 6.61% at December 31,
1999 and no amounts were borrowed as of December 31, 2000.
Questar Pipeline also invests excess cash balances with Questar.
The funds are centrally managed by Questar and earn an interest rate
that is identical to the interest rate paid by the subsidiaries
borrowing from Questar. Notes receivable from Questar as of
December 31, 2000 amounted to $20.7 million with an interest rate of
6.91% at December 31, 2000.
On February 27, 2001, Questar Pipeline gave notice that it will
redeem $30 million of its 9 7/8% debentures on March 30, 2001. The
redemption price is equal to 104.67% of the principal amount plus
interest from December 1, 2000. The Company intends to replace this
debt with medium-term notes.
Questar Pipeline's capital structure at year-end 2000 was 51%
long-term debt and 49% common shareholder's equity. Moody's and
Standard and Poor's have rated the Company's long-term debt A1 and
A+, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
All of the Company's long-term debt is borrowed at fixed rates. As
the need arises, the Company borrows funds on short-term basis,
which bear variable-interest rates. However, the Company had no
short-term borrowings at December 31, 2000.
Forward-Looking Statements
This report includes "forward-looking statements" within the meaning
of Section 27(a) of the Securities Act of 1933, as amended, and
Section 21(e) of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical facts included or
incorporated by reference in this report, including, without
limitation, statements regarding the Company's future financial
position, business strategy, budgets, projected costs and plans and
objectives of management for future operations, are forward-looking
statements. In addition, forward-looking statements generally can
be identified by the use of forward-looking terminology such as
"may", "will", "could", "expect", "intend", "project", "estimate",
"anticipate", "believe", "forecast", or "continue" or the negative
thereof or variations thereon or similar terminology. Although
these statements are made in good faith and are reasonable
representations of the Company's expected performance at the time,
actual results may vary from management's stated expectations and
projections due to a variety of factors.
Important assumptions and other significant factors that could cause
actual results to differ materially from those expressed or implied
in forward-looking statements include changes in general economic
conditions, gas prices and supplies, competition, rate-regulatory
issues and other factors beyond the control of the Company. These
other factors include the rate of inflation, the effect of natural
phenomena, the effect of accounting policies issued periodically by
accounting standard-setting bodies, and adverse changes in the
business or financial condition of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's financial statements are included in Part IV,
Item 14, herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
The Company has not changed its independent auditors or had any
disagreements with them concerning accounting matters and financial
statement disclosures within the last 24 months.
PART III
The Company, as the wholly owned subsidiary of a reporting
company under the Act, is entitled to omit all information requested
in Part III (Items 10-13).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a)(1)(2) Financial Statements and Financial Statement Schedules.
The financial statements identified on the List of Financial Statements
are filed as part of this Report.
(a)(3) Exhibits. The following is a list of exhibits required
to be filed as a part of this Report in Item 14(c).
Exhibit No. Description
2.*1 Agreement of Transfer among Mountain Fuel Supply
Company, Entrada Industries, Inc. and Mountain Fuel
Resources, Inc., dated July 1, 1984. (Exhibit No.
2. to Registration Statement No. 2-96102 filed
February 27, 1985.)
3.* Restated Articles of Incorporation dated November 17,
1995. (Exhibit No. 3. to Form 10-K Annual Report for
1995.)
3.3.* Bylaws (as amended on August 11, 1992). (Exhibit
No. 3. to Form 10-Q Report for quarter ended June
30, 1992.)
4.1.*2 Indenture dated as of June 1, 1991, for 9-3/8%
Debentures due June 1, 2021, with Morgan Guaranty
Trust Company of New York as Trustee. (Exhibit
No. 4. to Form 10-Q Report for quarter ended June
30, 1991.)
4.2.* Indenture dated as of August 17, 1998, with First
Security Bank, N.A., as Trustee, for Debt Securities.
(Exhibit No. 4.01. to Registration Statement on Form S-3
(No. 333-61621) filed August 17, 1998.)
10.1.*1,3 Overthrust Pipeline Company General Partnership
Agreement dated September 20, 1979, as amended
and restated as of October 11, 1982, and as
amended August 21, 1991, among CIG Overthrust,
Inc., Columbia Gulf Transmission Company;
Mountain Fuel Resources, Inc.; NGPL-Overthrust
Inc.; Northern Overthrust Pipeline Company; and
Tennessee Overthrust Gas Company. (Exhibit No.
10.4. to Form 10-K Annual Report for 1985,
except that the amendment dated August 21,
1991, is included as Exhibit No. 10.4. to Form
10-K Annual Report for 1992.)
10.2.* Partnership Agreement for the TransColorado Gas
Transmission Company dated July 1, 1997, between
KN TransColorado, Inc. and Questar TransColorado,
Inc. (Exhibit No. 10.4. to Form 10-K Annual
Report for 1997.)
10.3.* Letter of Understanding dated July 13, 1998, on Issues
Relating to Phase II of TransColorado between Questar
TransColorado, Inc. and KN TransColorado, Inc. (Exhibit
No. 10.1. to Form 10-Q Report for quarter ended June 30,
1998.)
10.4.4* Firm Transportation Service Agreement with Mountain Fuel
Supply Company under Rate Schedule T-1 dated August 10,
1993. (Exhibit No. 10.5. to Form 10-K Annual Report for
1993.)
10.5.*4 Storage Service Agreement with Mountain Fuel Supply
Company under Rate Schedule FSS, for 3.5 Bcf of working
gas capacity at Clay Basin, with a term from September 1,
1993, through August 31, 2008. (Exhibit No. 10.6. to
Form 10-K Annual Report for 1993.)
10.6.*4 Storage Service Agreement with Mountain Fuel Supply
Company under Rate Schedules FSS, for 3.5 Bcf of working
gas capacity at Clay Basin with a term from September 1,
1993, through August 31, 2013. (Exhibit No. 10.7. to
Form 10-K Annual Report for 1993.)
10.7.*4 Storage Service Agreement with Mountain Fuel Supply
Company under Rate Schedule FSS, for 5.5 Bcf of working
gas capacity at Clay Basin, with a term from May 15, 1994
through May 14, 2019. (Exhibit No. 10.8. to Form 10-K
Annual Report for 1995.)
10.8 .* Agreement for the Transfer of Assets between Questar
Pipeline Company and Questar Gas Management Company, as
amended, effective March 1, 1996. (Exhibit No. 10.11. to
Form 10-K Annual Report for 1996.)
10.9 .* Asset Purchase Agreement dated October 23, 1998, between
Questar Line 90 Company, a wholly-owned subsidiary, and
ARCO Pipeline Company. (Exhibit No. 10.5. to Form 10-Q
Report for quarter ended September 30, 1998.)
10.10. Agreement with Colorado Interstate Gas Company, as
amended and restated effective January 12, 2001, for
Mainline 104 and other projects.
12. Ratio of Earnings to Fixed Charges.
21. Subsidiary Information.
23. Consent of Independent Auditors
24. Power of Attorney.
*Exhibits so marked have been filed with the Securities and
Exchange Commission as part of the indicated filing and are
incorporated herein by reference.
1The documents listed here have not been formally amended to refer
to the Company's current name. They still refer to the Company as
Mountain Fuel Resources, Inc.
2First Security Bank, N.A., serves as the successor trustee.
3The Overthrust Partnership Agreement has not been formally
amended to delete the names of Columbia Gulf Transmission Company,
Tennessee Overthrust Gas Company, and Northern Overthrust Pipeline
Company as partners.
4Agreement incorporates specified terms and conditions of
Questar Pipeline's FERC Gas Tariff, First Revised Volume No. 1. The
tariff provisions are not filed as part of the exhibit, but are
available upon request.
(b) The Company filed a Current Report on Form 8-K dated
December 31, 2000, reporting the decision by QTC to exercise its
contractual right to sell its 50 percent interest in TransColorado
KN TC.
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a) (1) AND (2), AND (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31, 2000
QUESTAR PIPELINE COMPANY
SALT LAKE CITY, UTAH
FORM 10-K--ITEM 14 (a) (1) AND (2)
QUESTAR PIPELINE COMPANY AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following financial statements of Questar Pipeline Company are
included in Item 8:
Consolidated statements of income--Years ended December 31, 2000,
1999 and 1998
Consolidated balance sheets--December 31, 2000 and 1999
Consolidated statements of cash flows--Years ended December 31, 2000,
1999, and 1998
Consolidated statements of shareholder's equity--Years ended
December 31, 2000, 1999 and 1998
Notes to consolidated financial statements
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
Report in Independent Auditors
Board of Directors
Questar Pipeline Company
We have audited the accompanying balance sheets of Questar Pipeline Company
as of December 31, 2000 and 1999, and the related statements of income and
common shareholder's equity and cash flows for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonabale assurance about whether the
financial statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Questar Pipeline
Company at December 31, 2000 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young
Ernst & Young
Salt Lake City, Utah
March 6, 2001
QUESTAR PIPELINE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
(In Thousands)
REVENUES
From unaffiliated customers $42,500 $36,922 $37,156
From affiliates 76,576 75,238 71,401
TOTAL REVENUES 119,076 112,160 108,557
OPERATING EXPENSES
Operating and maintenance 43,761 38,534 38,832
Depreciation and amortization 15,391 16,743 13,927
Other taxes 3,071 2,488 2,600
TOTAL OPERATING EXPENSES 62,223 57,765 55,359
OPERATING INCOME 56,853 54,395 53,198
INTEREST AND OTHER INCOME 3,025 4,229 78
OPERATIONS OF UNCONSOLIDATED
AFFILIATES
Income (loss) 1,220 (5,109) 4,011
Write-down of investment in partnership (49,700)
1,220 (54,809) 4,011
DEBT EXPENSE (17,584) (17,466) (14,456)
INCOME (LOSS) BEFORE
INCOME TAXES 43,514 (13,651) 42,831
INCOME TAXES (CREDIT) 13,689 (5,260) 14,940
NET INCOME (LOSS) $29,825 ($8,391) $27,891
See notes to consolidated financial statements.
QUESTAR PIPELINE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
2000 1999
(In Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,855 $2,387
Note receivable from Questar 20,700 1,100
Accounts receivable 10,044 17,758
Accounts receivable from affiliates 1,623 3,946
Materials and supplies, at lower of
average cost or market 2,276 2,443
Prepaid expenses and other 477 1,782
TOTAL CURRENT ASSETS 36,975 29,416
PROPERTY, PLANT AND EQUIPMENT
Transmission 345,790 332,271
Storage 221,478 218,513
Processing 23,656 20,493
General and intangible 45,355 44,372
Construction work in progress 94,967 82,587
731,246 698,236
Less allowances for depreciation
and amortization 243,006 228,784
NET PROPERTY, PLANT AND EQUIPMENT 488,240 469,452
INVESTMENT IN UNCONSOLIDATED
AFFILIATES 19,088 11,724
OTHER ASSETS
Regulatory assets 10,190 9,672
Other noncurrent assets 6,238 2,763
TOTAL OTHER ASSETS 16,428 12,435
$560,731 $523,027
December 31,
2000 1999
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable to Questar $42,500
Accounts payable and accrued expenses
Accounts and other payables $4,861 7,145
Accounts payable to affiliates 1,472 3,409
Federal income taxes 1,560
Other taxes 2,145 1,471
Interest 1,625 1,621
Total accounts payable and
accrued expenses 10,103 15,206
TOTAL CURRENT LIABILITIES 10,103 57,706
LONG-TERM DEBT 245,020 245,001
DEFERRED INCOME TAXES 62,741 49,891
OTHER LIABILITIES 7,231 3,118
COMMITMENTS AND CONTINGENCIES - Note 6
COMMON SHAREHOLDER'S EQUITY
Common stock - par value $1 per share;
authorized 25,000,000 shares; issued
and outstanding 6,550,843 shares 6,551 6,551
Additional paid-in capital 142,034 82,034
Retained earnings 87,051 78,726
TOTAL COMMON SHAREHOLDER'S EQUITY 235,636 167,311
$560,731 $523,027
See notes to consolidated financial statements.
QUESTAR PIPELINE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Additional
Common Paid-in Retained
Stock Capital Earnings
(In Thousands)
Balance at January 1, 1998 $6,551 $82,034 $101,726
1998 net income 27,891
Payment of common stock dividends (21,000)
Balance at December 31, 1998 6,551 82,034 108,617
1999 net income (8,391)
Payment of common stock dividends (21,500)
Balance at December 31, 1999 6,551 82,034 78,726
2000 net income 29,825
Equity investment 60,000
Payment of common stock dividends (21,500)
Balance at December 31, 2000 $6,551 $142,034 $87,051
See notes to consolidated financial statements.
QUESTAR PIPELINE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
(In Thousands)
OPERATING ACTIVITIES
Net income (loss) $29,825 ($8,391) $27,891
Adjustments to reconcile net
income (loss) to net cash provided
from operating activities
Depreciation and amortization 16,516 17,847 14,977
Deferred income taxes and investment tax 12,850 (13,619) 1,212
Write-down of investment in partnership 49,700
(Income) loss from unconsolidated
affiliates, net of cash distributions 1,660 7,701 (1,735)
60,851 53,238 42,345
Changes in operating assets and liabilities
Accounts receivable 10,102 (400) (10,453)
Materials and supplies 167 (240) 100
Prepaid expenses and other 1,305 (68) 321
Accounts payable and accrued expenses (3,542) (37,018) 30,657
Federal income taxes (1,625) 1,177 321
Other assets (3,994) 72 (2,359)
Other liabilities 4,132 (1,418) 51
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 67,396 15,343 60,983
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and equipmen (34,011) (36,010) (88,318)
Other investments (9,024) (14,414) (26,000)
Total capital expenditures (43,035) (50,424) (114,318)
Proceeds from (costs of) disposition
of property, plant and equipment (1,293) 3,578 (3,350)
NET CASH USED IN INVESTING ACTIVITIES (44,328) (46,846) (117,668)
FINANCING ACTIVITIES
Equity investment 60,000
Increase in note receivable from Questar (19,600) (1,100)
Change in note payable to Questar (42,500) 4,500 12,200
Issuance of long-term debt 42,000 88,400
Repayment of long-term debt (20,000)
Payment of dividends (21,500) (21,500) (21,000)
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES (23,600) 23,900 59,600
CHANGE IN CASH AND CASH EQUIVALENTS (532) (7,603) 2,915
BEGINNING CASH AND CASH EQUIVALENTS 2,387 9,990 7,075
ENDING CASH AND CASH EQUIVALENTS $1,855 $2,387 $9,990
See notes to consolidated financial statements.
QUESTAR PIPELINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Accounting Policies
Principles of Consolidation: The consolidated financial statements
contain the accounts of Questar Pipeline Company and subsidiaries (the
Company or Questar Pipeline). The Company is a wholly-owned subsidiary
of Questar Regulated Services Company (Regulated Services). Regulated
Services is a holding company and wholly-owned subsidiary of Questar
Corporation (Questar). Regulated Services was organized in 1996 and
provides the administrative, accounting, engineering, legal and
regulatory functions for its three subsidiaries, Questar Pipeline,
Questar Gas Company (Questar Gas) and Questar Energy Services. Questar
Pipeline provides storage and interstate transportation of natural
gas. A subsidiary, Questar Transportation Services, operates a plant
designed to remove excess carbon dioxide from the pipelines. A
subsidiary, Questar Line 90 Company, has acquired an oil pipeline that
will be converted to transport natural gas and another subsidiary,
Questar Southern Trails Pipeline Company, will be the ultimate owner
and operator of the pipeline. All significant intercompany balances
and transactions have been eliminated in consolidation.
Investment in Unconsolidated Affiliates: Questar Pipeline uses the
equity method to account for investments in affiliates in which it
does not have control. The principal affiliates and percentage
ownership are: Overthrust Pipeline Company (72%) and TransColorado Gas
Transmission Company (50%). Questar Pipeline increased its ownership
in the Overthrust Pipeline partnership to 72%, when it acquired an 18%
interest from another partner effective January 1, 2000. Questar
Pipeline is the operator of the Overthrust Segment of the Trailblazer
Pipeline System. Approval of all partners is required for all
substantive policy matters. Generally, the Company's investment in
these affiliates equals the underlying equity in net assets, except
for TransColorado where the investment was written down in 1999. The
Company experienced an other-than-temporary decline in its partnership
investment caused by low volumes resulting from unfavorable regional
transportation economics.
Regulation: Questar Pipeline is regulated by the Federal Energy
Regulatory Commission (FERC) which establishes rates for the
transportation and storage of natural gas. The FERC also regulates,
among other things, the extension and enlargement or abandonment of
jurisdictional natural gas facilities. Regulation is intended to
permit the recovery, through rates, of the cost of service including a
return on investment. The financial statements are presented in
accordance with regulatory requirements. Methods of allocating costs
to time periods, in order to match revenues and expenses, may differ
from those of nonregulated businesses because of cost allocation
methods used in establishing rates. The Company has recorded
regulatory assets reflecting differences in accounting for early
retirement window costs, reacquisition of debt and deferred income
taxes.
Use of Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosure of
contingent liabilities reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition: Revenues are recognized in the period that
services are provided or products are delivered. Questar Pipeline
periodically collects revenues subject to possible refunds pending
final orders from the FERC. The Company establishes reserves for
revenues collected subject to refund.
Cash and Cash Equivalents: Cash equivalents consist principally of
repurchase agreements with maturities of three months or less. In
almost all cases, the repurchase agreements are highly liquid
investments in overnight securities made through commercial bank
accounts that result in available funds the next business day.
Notes Receivable from Questar: Notes receivable from Questar
represent interest bearing demand notes for cash loaned to Questar
until needed in the Company's operations. The funds are centrally
managed by Questar and earn an interest rate that is identical to the
interest rate paid by the Company for borrowings from Questar.
Property, Plant and Equipment: Property, plant and equipment is
stated at cost. The provision for depreciation is based upon rates,
which will systematically charge the costs of assets over their
estimated useful lives. The costs of property, plant and equipment are
depreciated in the financial statements using the straight-line
method, ranging from 3% to 33% per year and averaging 3.2%, 3.4% and
3.2% in 2000, 1999 and 1998 respectively.
Allowance for Funds Used During Construction: The Company capitalized
the cost of capital during the construction period of plant and
equipment in accordance with FERC guidelines. Capitalized financing
costs, called allowance for funds used during construction (AFUDC),
consist of debt and equity portions. The debt portion of AFUDC is
recorded as a reduction of interest expense and the equity portion is
recorded in other income. Debt expense was reduced by $3,315,000 in
2000, $2,677,000 in 1999 and $625,000 in 1998. AFUDC included in
interest and other income amounted to $2,313,000 in 2000, $1,660,000
in 1999 and $61,000 in 1998.
Reacquisition of Debt: Gains and losses on the reacquisition of debt
are deferred and amortized as debt expense over the remaining life of
the issue in order to match regulatory treatment.
Income Taxes: The Company accounts for income tax expense on a
separate return basis. Pursuant to the Internal Revenue Code and
associated regulations, the Company 's operations are consolidated
with those of Questar and its subsidiaries for income tax reporting
purposes. The Company records tax benefits as they are generated.
The Company receives payments from Questar for such tax benefits as
they are utilized on the consolidated return. Questar Pipeline
records cumulative increases in deferred taxes as income taxes
recoverable from customers. The Company has adopted procedures with
the FERC to include under-and over-provided deferred taxes in customer
rates on a systematic basis. Questar Pipeline uses the deferral method
to account for investment tax credits as required by the FERC.
New Accounting Standard: The Company is required to adopt the
accounting provisions of Statement of Financial Accounting Standards
133, as amended, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) beginning in January 2001. SFAS 133 addresses
the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the
standard, entities are required to carry all derivative instruments in
the balance sheet at fair value. The accounting for changes in fair
value, which result in gains of losses, of a derivative instrument
would either be reported in income or comprehensive income. The
Company has identified a number of contracts that are derivative
instruments as defined by SFAS 133, but are specifically excluded from
the provisions of SFAS 133 on the basis of normal sales and purchase
transactions. The Company has not entered into any commodity or
interest -based derivative instruments.
Reclassifications: Certain reclassifications were made to the 1999
and 1998 financial statements to conform with the 2000 presentation.
Note 2 - Investment in Unconsolidated Affiliates
Questar Pipeline, through its subsidiaries, has interests in
partnerships accounted for on the equity basis. Transportation of
natural gas is the primary business activity of these partnerships.
Summarized information of the partnerships follow:
2000 1999 1998
(In Thousands)
Year Ended December 31,
Revenues $11,770 $10,676 $7,958
Operating income (loss) (3,360) (3,315) 3,209
Income (loss) (20,739) (10,014) 8,601
At December 31,
Current assets $4,812 $5,762 $12,933
Total assets 311,810 325,371 293,034
Current liabilities 8,386 24,237 21,751
Total liabilities 214,496 248,503 181,967
Note 3 - Debt
Questar makes loans to Questar Pipeline under a short-term borrowing
arrangement. Outstanding short-term notes payable to Questar totaled
$42.5 million with an interest rate of 6.61% at December 31, 1999 and
no amounts were borrowed as of December 31, 2000.
Questar Pipeline also invests excess cash balances with Questar. The
funds are centrally managed by Questar and earn an interest rate that
is identical to the interest rate paid by the subsidiaries borrowing
from Questar. Notes receivable from Questar as of December 31, 2000,
amounted to $20.7 million with an interest rate of 6.91% at December
31, 2000.
The details of long-term debt at December 31 were as follows:
2000 1999
(In Thousands)
Medium-term notes 5.85% to 7.55%,
due 2008 to 2019 $130,400 $130,400
9 3/8% debentures due 2021 85,000 85,000
9 7/8% debentures due 2020 30,000 30,000
Total long-term debt outstanding 245,400 245,400
Less unamortized debt discount 380 399
$245,020 $245,001
On February 27, 2001, Questar Pipeline gave notice that it will redeem
its 9 7/8% debentures on March 30, 2001. The redemption price is
equal to 104.67% of the principal amount plus interest from December 1,
2000. Yearly sinking fund redemptions of the 9 3/8% debt begin in
2002 in the amount of $4,250,000. There are no debt provisions
restricting the payment of dividends.
Cash paid for interest was $20,384,000 in 2000, $19,030,000 in 1999
and $14,761,000 in 1998.
As of December 31, 2000, Questar Pipeline guaranteed $100 million of
long-term debt borrowed by TransColorado Gas Transmission Company.
The partnership has borrowed $200 million under a three-year
revolving-credit arrangement that will expire unless renewed by
October 2001.
Note 4 - Financial Instruments and Risk Management
The carrying amounts and estimated fair values of the Company's
financial instruments at December 31 were as follows:
2000 1999
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(In Thousands)
Financial assets
Cash and cash equivalents $1,855 $1,855 $2,387 $2,387
Financial liabilities
Short-term loans 42,500 42,500
Long-term debt 245,020 250,099 245,001 240,602
The Company used the following methods and assumptions in estimating
fair values: (1) Cash and cash equivalents and short-term loans - the
carrying amount approximates fair value; (2) Long-term debt - the fair
value of long-term debt is based on quoted market prices. Fair value
is calculated at a point in time and does not represent the amount the
Company would pay to retire the debt securities.
Credit Risk: Questar Pipeline's primary market is the Rocky Mountain
region in the United States, and will include the southwestern region
once Questar Pipline's subsidiary, Questar Southern Trails, puts its
pipeline into service. The Company's exposure to credit risk may be
impacted by the concentration of customers in these regions due to
changes in economic or other conditions. The Company's customers may
be affected differently by changing conditions. Management believes
that its credit-review procedures, loss reserves and collection
procedures have adequately provided for usual and customary
credit-related losses.
Note 5 - Income Taxes
The components of income taxes for years ended December 31 were as
follows:
2000 1999 1998
(In Thousands)
Federal
Current $604 $7,852 $12,341
Deferred 15,230 (13,466) 1,257
State
Current 222 721 1,108
Deferred (2,367) (367) 234
$13,689 ($5,260) $14,940
The difference between income tax expense and the tax computed by
applying the statutory federal income tax rate of 35% to income (loss)
before income taxes is explained as follows:
2000 1999 1998
(In Thousands)
Income (loss) before income taxes $43,514 ($13,651) $42,831
Federal income taxes (credit) at
statutory rate $15,230 ($4,778) $14,991
State income taxes, net of federal income
tax benefit (1,394) 230 872
Prior years' tax settlement (410) (388)
Other (147) (302) (535)
Income taxes (credit) $13,689 ($5,260) $14,940
Effective income tax rate 31.5% 38.5% 34.9%
Significant components of the Company's deferred income taxes at
December 31 were as follows:
2000 1999
(In Thousands)
Deferred tax liabilities
Property, plant and equipment $69,991 $66,008
Other 7,201 7,173
Total deferred tax liabilities 77,192 73,181
Deferred tax assets
Write-down of investment
in partnership 11,806 18,400
Other 2,645 4,890
Total deferred tax assets 14,451 23,290
Net deferred income taxes $62,741 $49,891
A Colorado state income tax credit derived from conducting business in
a designated enterprise zone reduced state income taxes by $3.2
million in 2000. The tax credit has a 3-year carry back and a 12 year
carry forward provision.
Cash paid for income taxes was $1,834,000 in 2000, $7,353,000 in 1999
and $13,004,000 in 1998.
Note 6 - Rate Matters, Litigation and Commitments
Federal rate regulation
The Federal Energy Regulatory Commission (FERC) issued a final order
granting a certificate of public convenience and necessity to
Questar's Southern Trails Pipeline. The FERC's July 28, 2000, ruling
came after the agency became satisfied that the pipeline was in the
public convenience and necessity and could be completed in an
environmentally sound manner. The California State Lands Commission
has formally certified the Environmental Impact Report for the
Southern Trails Pipeline. Questar Pipeline is actively working on
right-of-way issues and exploring marketing opportunities to subscribe
Southern Trail's pipeline capacity.
Questar Pipeline has received a preliminary determination from the
FERC to construct a 75-mile natural gas pipeline from the Price area
in eastern Utah to a proposed interconnect with Kern River Gas
Transmission Co. near Elberta, Utah. Final approval is contingent
upon completion of an environmental impact statement. The proposed
expansion of Questar Pipeline's interstate system will parallel an
existing Questar pipeline for 57 miles from Price to Payson, Utah. The
$80 million project, referred to as Main Line 104, will be 24 inches
in diameter, with a maximum operating pressure of 1,400 pounds per
square inch. Colorado Interstate Gas has a 31.3% interest in this
project through a sale-leaseback arrangement.
TransColorado case
Questar TransColorado Inc. (QTC) and its partner, KN TransColorado,
Inc., (KNTC) in the TransColorado Gas Transmission Company
(TransColorado) are involved in a complex lawsuit that is pending in a
state district court in Colorado. At the center of the lawsuit is the
validity of a contractual right claimed by QTC to put its 50% interest
in TransColorado to KNTC during the 12-month period beginning March
31, 2001.
KNTC originally filed a lawsuit in June of 2000 alleging that Questar
Pipeline and its affiliates breached their fiduciary duties to
TransColorado and KNTC by developing a plan to construct and operate a
new pipeline that would compete with TransColorado, rendering it
economically unviable. KNTC is seeking damages in excess of $150
million plus punitive damages; a declaratory judgment that KNTC's
obligation to purchase QTC's interest in the project be declared void
and unenforceable; and a dissolution of the partnership under Colorado
law.
QTC and its affiliates subsequently filed a counterclaim and
third-party complaint against KNTC and named affiliates, including
Kinder Morgan, Inc., seeking a declaratory judgment that its
contractual right to exercise the put is binding and enforceable and
damages of at least $185 million.
The trial judge denied the motion filed by the Questar defendants to
stay the proceedings and remove some issues to be considered by the
FERC. The parties have entered into a standstill agreement that
preserves the claims made by both parties pending the resolution of
the litigation. On December 31, 2000, QTC gave notice of its election
to exercise its contractual right to sell its 50% interest in
TransColorado to KNTC, subject to the provisions of a standstill
agreement. The parties are investigating hiring an outside party to
operate the TransColorado pipeline during litigation. The trial is
scheduled for February of 2002.
Grynberg lawsuits
Questar affiliates are named defendants in a lawsuit filed by
independent gas producer Jack J. Grynberg under the Federal False
Claims Act. This case and the 75 substantially similar cases filed by
Grynberg against pipelines and their affiliates have been consolidated
for discovery and pre-trial rulings in Wyoming federal district court.
The cases involve allegations of industry wide mismeasurement and
undervaluation of gas on which royalty payments are due the federal
government. The complaint seeks treble damages and imposition of
civil penalties. The Wyoming district court judge has not ruled on the
defendants' motion to dismiss.
Grynberg has filed a case against Questar Pipeline, Questar Energy
Trading and Questar Gas Management in Utah state district court,
alleging mismeasurement of gas volumes attributable to his working
ownership interest in a specified property in southwestern Wyoming.
Grynberg alleges breach of contract, negligent misrepresentation,
fraud, breach of fiduciary duty, etc. On March 8, 2001, the trial
judge granted defendants' motion to dismiss a case by Grynberg.
It is too early to estimate the outcome of the other cases filed by
Grynberg against Questar affiliates.
There are various other legal proceedings against Questar Pipeline.
While it is not currently possible to predict or determine the
outcomes of these proceedings, it is the opinion of management that
the outcomes will not have a material adverse effect on the Company's
results of operations, financial position or liquidity.
Note 7 - Employment Benefits
Pension Plan: Substantially all of Questar Pipeline's employees are
covered by Questar's defined benefit pension plan. Benefits are
generally based on years of service and the employee's 72-pay period
interval of highest earnings during the ten years preceding
retirement. It is Questar's policy to make contributions to the plan
at least sufficient to meet the minimum funding requirements of
applicable laws and regulations. Plan assets consist principally of
equity securities and corporate and U.S. government debt obligations.
Questar Pipeline's portion of plan assets and benefit obligations is
not determinable because the plan assets are not segregated or
restricted to meet the Company's pension obligations. If the Company
were to withdraw from the pension plan, the pension obligation for the
Company's employees would be retained by the pension plan. At
December 31, 2000, Questar's net benefit obligation exceeded the fair
value of plan assets.
Questar Regulated Services offered early retirement windows to
eligible employees in 2000 and 1998. In 2000, a total of 276
employees and recipients of long-term disability from Questar Gas,
Questar Pipeline and Questar Regulated Services elected to retire
effective October 31. The $14.4 million cost of the early retirement
window will be amortized over a five-year period in accordance with
regulatory treatment. In 1998, Regulated Services offered an early
retirement window that was accepted by 178 eligible employees. The
$3.1 million cost of the window is being amoritzed over a five-year
period beginning August 1998. About one-third of the early retirement
window costs will be charged to Questar Pipeline. Pension cost was
$367,000 in 2000, $411,000 in 1999 and $382,000 in 1998.
Postretirement Benefits Other Than Pensions: Generally postretirement
health-care benefits and life insurance are provided only to employees
hired before January 1, 1997. Questar Pipeline pays a portion of
postretirement health-care costs as determined by an employee's years
of service and limited to 170% of the 1992 contribution. The Company's
policy is to fund amounts allowable for tax deduction under the
Internal Revenue Code. Plan assets consist of equity securities, and
corporate and U.S. government debt obligations. The Company is
amortizing the transition obligation over a 20-year period, which
began in 1992. The FERC allows rate-recovery of future postretirement
benefits costs to the extent that contributions are made to an
external trust. Questar Pipeline has recorded a $1.3 million
regulatory liability as of December 31, 2000. As a result of returns
earned on investments, the Company recorded expense reductions of
$352,000 in 2000 and $223,000 in 1999. Costs of postretirement
benefits other than pensions were $69,000 in 1998.
Questar Pipeline's portion of plan assets and benefit obligations
related to postretirement medical and life insurance benefits is not
determinable because the plan assets are not segregated or restricted
to meet the Company's obligations.
Postemployment Benefits: Questar Pipeline recognizes the net present
value of the liability for postemployment benefits, such as long-term
disability benefits and health-care and life-insurance costs, when
employees become eligible for such benefits. Postemployment benefits
are paid to former employees after employment has been terminated but
before retirement benefits are paid. The Company accrues both current
and future costs. The Company has a regulatory asset amounting to
$323,000 as of December 31, 2000.
Employee Investment Plan: The Company participates in Questar's
Employee Investment Plan (Plan), which allows eligible employees to
purchase shares of Questar common stock or other investments through
payroll deduction. Since January 1, 1999, the Company has matched 80%
of employee-pretax purchases up to a maximum of 6% and contributes an
additional $200 of common stock in the name of each eligible employee.
Prior to that date, the Company matched 75% of employee's eligible
contributions. The Company's expense equals its matching
contribution. The Company's expense and contribution to the plan was
$314,000 in 2000, $281,000 in 1999 and $302,000 in 1998.
Note 8 - Related-Party Transactions
Regulated Services provides administrative, technical, accounting,
legal and regulatory support to Questar Pipeline at its cost.
Regulated Services charged Questar Pipeline $18,786,000 in 2000,
$22,623,000 in 1999 and $15,271,000 in 1998. The majority of these
costs are allocated and included in operating and maintenance
expenses. The allocation methods are based on several methods
dictated by the nature of the charges. Management believes that the
allocation methods are reasonable.
Questar Pipeline receives a substantial portion of its revenues from
Questar Gas Company. Revenues received from Questar Gas amounted to
$73,742,000 in 2000, $71,636,000 in 1999 and $67,528,000 in 1998. The
Company also received revenues from other affiliated companies
totaling $2,834,000 in 2000, $3,602,000 in 1998 and $3,873,000 in
1998.
Questar performs certain administrative functions for Questar
Pipeline. The Company was charged for its allocated portion of these
services that totaled $2,964,000 in 2000, $2,424,000 in 1999 and
$2,173,000 in 1998. These costs are included in operating and
maintenance expenses and are allocated based on each affiliate's
proportional share of revenues, net of gas costs; property, plant and
equipment; and payroll. Management believes that the allocation method
is reasonable.
Questar InfoComm Inc is an affiliated company that provides data
processing and communication services to Questar Pipeline. Direct
charges paid by the Company to Questar InfoComm amounted to $9,043,000
in 2000, $8,345,000 in 1999 and $10,548,000 in 1998.
Questar Pipeline has an 11-year lease with an option for renewal with
an affiliate for some space in an office building located in Salt Lake
City, Utah. Rent expense was $648,000, $580,000 and $576,000 in 2000,
1999, and 1998, respectively. The annual lease payment for the five
years following 2000 are scheduled as follows: $655,000 in 2001,
$671,000 in 2002 and $867,000 each year in 2003, 2004 and 2005.
The Company incurred debt expense payable to Questar of $800,000 in
2000, $2,087,000 in 1999 and $2,420,000 in 1998 and received interest
income amounting to $234,000 in 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 28th day of March, 2001.
QUESTAR PIPELINE COMPANY
(Registrant)
By /s/ D. N. Rose
D. N. Rose
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
/s/ D. N. Rose President & Chief Executive Officer;
D. N. Rose Director (Principal Executive Officer)
/s/ S. E. Parks Vice President, Treasurer and Chief
S. E. Parks Financial Officer (Principal
Financial Officer)
/s/D. M. Curtis Controller
D. M. Curtis (Principal Accounting Officer)
*R. D. Cash Chairman of the Board; Director
*U. Edwin Garrison Director
*Scott S. Parker Director
*K. O. Rattie Director
*D. N. Rose Director
March 28, 2001 *By /s/ D. N. Rose
Date D. N. Rose, Attorney in Fact
EXHIBIT INDEX
Exhibit
Number Exhibit
2.*1 Agreement of Transfer among Mountain Fuel Supply Company,
Entrada Industries, Inc. and Mountain Fuel Resources,
Inc., dated July 1, 1984. (Exhibit No. 2. to Registration
Statement No. 2-96102 filed February 27, 1985.)
3.* Restated Articles of Incorporation dated November 17,
1995. (Exhibit No. 3. to Form 10-K Annual Report for 1995.)
3.3.* Bylaws (as amended on August 11, 1992). (Exhibit No. 3.
to Form 10-Q Report for quarter ended June 30, 1992.)
4.1.*2 Indenture dated as of June 1, 1991, for 9-3/8% Debentures
due June 1, 2021, with Morgan Guaranty Trust Company of
New York as Trustee. (Exhibit No. 4. to Form 10-Q Report
for quarter ended June 30, 1991.)
4.2.* Indenture dated as of August 17, 1998, with First Security
Bank, N.A., as Trustee, for Debt Securities. (Exhibit No.
4.01. to Registration Statement on Form S-3 (No.
333-61621) filed August 17, 1998.)
10.1.*1,3 Overthrust Pipeline Company General Partnership Agreement
dated September 20, 1979, as amended and restated as of
October 11, 1982, and as amended August 21, 1991, among CIG
Overthrust, Inc., Columbia Gulf Transmission Company;
Mountain Fuel Resources, Inc.; NGPL-Overthrust Inc.; Northern
Overthrust Pipeline Company; and Tennessee Overthrust Gas Company.
(Exhibit No. 10.4. to Form 10-K Annual Report for 1985, except
that the amendment dated August 21, 1991, is included as Exhibit
No. 10.4. to Form 10-K Annual Report for 1992.)
10.2.* Partnership Agreement for the TransColorado Gas
Transmission Company dated July 1, 1997, between KN
TransColorado, Inc. and Questar TransColorado, Inc.
(Exhibit No. 10.4. to Form 10-K Annual Report for 1997.)
10.3.* Letter of Understanding dated July 13, 1998, on Issues
Relating to Phase II of TransColorado between Questar
TransColorado, Inc. and KN TransColorado, Inc. (Exhibit
No. 10.1. to Form 10-Q Report for quarter ended June 30,
1998.)
10.4.4* Firm Transportation Service Agreement with Mountain Fuel
Supply Company under Rate Schedule T-1 dated August 10, 1993.
(Exhibit No. 10.5. to Form 10-K Annual Report for 1993.)
10.5.*4 Storage Service Agreement with Mountain Fuel Supply Company
under Rate Schedule FSS, for 3.5 Bcf of working gas capacity
at Clay Basin, with a term from September 1, 1993, through
August 31, 2008. (Exhibit No. 10.6. to Form 10-K Annual
Report for 1993.)
10.6.*4 Storage Service Agreement with Mountain Fuel Supply Company
under Rate Schedules FSS, for 3.5 Bcf of working gas capacity
at Clay Basin with a term from September 1, 1993, through
August 31, 2013. (Exhibit No. 10.7. to Form 10-K Annual Report
for 1993.)
10.7.*4 Storage Service Agreement with Mountain Fuel Supply Company
under Rate Schedule FSS, for 5.5 Bcf of working gas capacity
at Clay Basin, with a term from May 15, 1994 through May 14,
2019. (Exhibit No. 10.8. to Form 10-K Annual Report for 1995.)
10.8 .* Agreement for the Transfer of Assets between Questar Pipeline
Company and Questar Gas Management Company, as amended, effective
March 1, 1996. (Exhibit No. 10.11. to Form 10-K Annual Report
for 1996.)
10.9 .* Asset Purchase Agreement dated October 23, 1998, between Questar
Line 90 Company, a wholly-owned subsidiary, and ARCO Pipeline
Company. (Exhibit No. 10.5. to Form 10-Q Report for quarter
ended September 30, 1998.)
10.10. Agreement with Colorado Interstate Gas Company, as amended
and restated effective January 12, 2001, for Mainline 104
and other projects.
12. Ratio of Earnings to Fixed Charges
21. Subsidiary Information.
23. Consent of Independent Auditors
24. Power of Attorney.
_______________
*Exhibits so marked have been filed with the Securities and
Exchange Commission as part of the indicated filing and are
incorporated herein by reference.
1The documents listed here have not been formally amended to refer
to the Company's current name. They still refer to the Company as
Mountain Fuel Resources, Inc.
2First Security Bank, N.A., serves as the successor trustee.
3The Overthrust Partnership Agreement has not been formally
amended to delete the names of Columbia Gulf Transmission Company,
Tennessee Overthrust Gas Company, and Northern Overthrust Pipeline
Company as partners.
4Agreement incorporates specified terms and conditions of
Questar Pipeline's FERC Gas Tariff, First Revised Volume No. 1. The
tariff provisions are not filed as part of the exhibit, but are
available upon request.